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Why Chancellor Philip Hammond is sticking with National Insurance rise for self-employed

Visiting Birmingham the Chancellor issued strong defence of his budget measure

Chancellor Philip Hammond today remained determined to plough ahead with his increase to National Insurance for self-employed people despite coming under pressure.

He was visiting Birmingham to promote the £394 million Midlands Engine investment he had announced in yesterday’s budget - including funding for apprenticeship training schemes.

It was his increase in National Insurance Contributions for the self-employed which had dominated the day’s headlines - with growing calls from Conservative MPs for the proposal, which was explicitly ruled out in the Conservative's 2015 election manifesto, to be dropped.

There were few, if any, signs of pressure as he met business leaders, the Conservative mayoral candidate Andy Street and viewed the construction site of the Three Snowhill office block.

And he issued a strong defence of his position arguing that the increase is about fairness and suggested some people are simply self-employed to benefit from artificial tax advantages.

Mr Hammond said: “We are big supporters of enterprise, of innovation and of self employment where that is the right approach and people should have choices about how they work.

Andy Street with Chancellor Philip Hammond

“But those choices should not be driven by artificial tax advantages that actually sometimes encourage or force people to do things in a structure that is not really the optimum structure for what they are doing.”

He said the gap in welfare and pension benefits between employed and self-employed people had closed dramatically in recent years, especially as state-pensions are available to the self-employed since last year.

“So we do have to ask self-employed people on higher incomes to put a little more into the pot. It’s nothing like the amount of employed people, but it’s a little more towards the pensions they enjoy and the health services they use.

“After all when they turn up to A&E department nobody asks if you’re self-employed or employed. Everybody gets treated the same and everybody has to contribute.”

Chancellor Philip Hammond

Although he did not directly rule out a U-turn when asked he said: “This is a basic issue of fairness. Yesterday addressed an unfairness in the system. Nobody likes being taxed more that’s obvious. But when people sit down and think about it quietly and calmly if think they will realise it is fair that they contribute to the services they are using and the benefits they are receiving.”

The move has not been widely welcomed. Labour’s West Midlands Mayor candidate Sion Simon said; “Many of the 146,000 self-employed people in the West Midlands will see yesterday’s budget for what it is: an attack on the self employed.”

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